This is Washington's first LNG refueling station, opened in Sumner by Blu LNG.

Tom BanseNorthwest News Network

Originally published on December 12, 2013 9:44 am

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Trucking fleet operators in the Northwest are showing growing interest in filling up with natural gas instead of diesel.

Two reasons: natural gas is cheaper and burns cleaner than the gasoline or diesel that goes into most vehicles. The problem is there are very few filling stations for natural gas.

Cleaner air, lower costs, limited infrastructure

Take delivery truck driver Corey Schaller. He has one last stop before he can call it a day. He has to refill the gas tank of the beer truck he drives for Kent, Washington-based Click Wholesale Distributing. But there are just a few places he can go. That's because this otherwise normal-looking Ford box truck has been converted to run on compressed natural gas -- or CNG.

One thing you may notice right away about CNG is the price at the pump. It's quite good -- the equivalent of $2.14 per gallon good.

And Schaller says he's glad he no longer spews diesel exhaust on his rounds delivering beer, wine and spirits.

"I feel like I'm helping in some way, at least the person driving behind me."

Schaller's bosses say cleaner air and the lower fuel price are key reasons they aspire to convert the company's entire fleet. Engine maintenance cost savings are another plus. By early next year, Click Wholesale CEO Jim Florio hopes to have seven of his 20 trucks fueled by natural gas.

"Along the way, we've been told that you're going to be the guinea pigs for this," says Florio. "We felt that way a little bit. But our drivers have come back and said, 'I feel really good about driving this truck.'"

Florio says the lack of refueling stations is a hurdle for wider adoption. Washington has seven public CNG stations, all in the central Puget Sound region. Oregon has just three public CNG filling stations; Idaho has two.

"We're all very limited," says Florio. "Especially if a station goes down in a core area and somebody is running low on fuel, you may not have enough fuel in the tank to get from where you're at to another station that is available."

Florio says there needs to be a stronger refueling infrastructure to get "to the next level."

Enter the big gas utilities

"As we saw our customer interest grow, we said this is sort of a natural place for us to provide a service that would help our customers," says Ben Farrow, Puget Sound Energy's manager of natural gas and electric development. He sees a potential market of "thousands" of vehicles which could plausibly be converted to natural gas just in western Washington.

PSE and the Portland-based utility NW Natural have approached their respective regulators for permission to sell on-site fueling stations to fleet operators. Spokane-based Avista Utilities says it's interested in this too and may follow.

"We feel to have utilities enter into the natural gas refueling infrastructure market creates an anti-competitive situation because of the advantages regulated utilities have as a result of their monopoly status," argues Warren Mitchell, chairman of a nationwide station builder and operator called Clean Energy Fuels.

Mitchell lists advantages like captive customers, cheaper access to capital, and the ability to cherry pick customers based on inside knowledge of usage.

"This is going beyond the meter," he says. "It is a private business function. It is best implemented by private business," argues Mitchell.

"Choices in that marketplace are a good thing," responds Farrow. "We don't want to compete unfairly."

Regulatory battle

In regulatory filings, NW Natural and Puget Sound Energy say they plan to run their vehicle fueling programs as discrete, self-sustaining operations. The PSE filing to its state utilities commission asserts, "Because customers served under this service will pay the full incremental costs associated with the provision of this service to their site, the addition of this optional service offering should have no negative cost impact on other ratepayers."

Competing fueling station providers -- including Clean Energy -- subsequently lodged formal objections. A joint letter to Washington state regulators says that if the incumbent utility is allowed to expand, it "will discourage competitors from investing in the Washington natural gas vehicle refueling infrastructure market, undermining the development of the very market the (proposal) claims to promote."

State regulators in Oregon will decide later this month whether to allow NW Natural to expand into the new line of business. A decision from the Washington Utilities and Transportation Commission on PSE's request is expected next year.

A spokesman for Intermountain Gas Company says the Boise-based utility is content to watch from the sidelines for now. "We're not sure we want to be fuel retailers to the general public. We want to facilitate third parties to do that," says Intermountain's Byron Defenbach.

This niche has not inspired the same competitive ire. Northwest gas utilities have limited their expansion plans to CNG and have not indicated interest in the LNG fueling infrastructure market.

The high cost to build filling stations and to convert vehicles to run on natural gas has narrowed the customer base mostly to large fleet operators with predictable routes or return-to-base operations for now.

Only one major automaker sells a factory-built CNG car, the Honda Civic Natural Gas. Its fuel tank takes up about half the space normally found in the trunk.